Stanford Grads Use `Uber of Real Estate' to Conquer Rio Rentals
(Bloomberg) -- Vicente Velazquez plunked down eight months’ worth of rent to get his own place in Rio de Janeiro. The monster deposit was the only way to avoid paying insurance, since he knew no one in the city willing to put property up as collateral.
It’s the kind of story that led Andre Penha and Gabriel Braga, Stanford MBA graduates, to start Quinto Andar, a technology company that’s shaking up the Brazilian rental industry.
The startup screens apartment hunters, acts as a guarantor for those with solid credit histories and eliminates middlemen. It even acts as a property manager to help fix things like broken faucets. All this saves renters time and money in a country beset with bureaucracy and hidden costs.
“Quinto Andar is going to be like Uber is to taxis,” said Velazquez, a 31-year-old physician who plans to use the service for his next apartment. "There’s no way I’m going back to another broker.”
Brazilian real estate agents not only require high-quality guarantors, they generally leave much to be desired in customer service. Some of them use blurry photographs in their listings and are elusive when it comes to details, until you show up at an apartment to discover it faces a slum or a brick wall. Also, they’re not about to guarantee renters.
“This is a real pain for people, and it’s a 200 billion-real ($60 billion) market,” Braga, 36, said in an interview at Quinto Andar’s Sao Paulo headquarters. “If we can fix this problem the consequences could be huge.”
Traditional brokers are worried about Quinto Andar’s fast expansion, and it’s prompting them to evaluate some of their more archaic processes.
"They took a large part of rentals in Sao Paulo; our colleagues there have been suffering," said Debora Mendonca, president of an association representing about 200 Rio-based brokers accounting for some 80 percent of the market. “We’re definitely concerned.”
Mendonca, who has more than three decades of experience in real estate, said weaker back-office capacity leaves her doubtful of Quinto Andar’s sustainability.
The name means "Fifth Floor," which Braga and Penha thought was catchier than naming the business after themselves. Quinto Andar started as a small operation in 2012 in Campinas, a city outside Sao Paulo. It has just expanded into Rio de Janeiro and plans to move into most major Brazilian cities by the end of the year, doubling staff to about 500. Its transaction volume grew sixfold last year, Braga said.
It was a hard sell at first -- among the first supporters were Stanford colleagues who borrowed money from their parents five years ago. Now Quinto Andar has received about 70 million reais. Kaszek Ventures, which helped start MercadoLibre Inc., one of Latin America’s largest e-commerce retailers, participated in two rounds of funding.
Quinto Andar “is going to be a leader and one of the iconic tech companies in Brazil,” said Nicolas Szekasy, a co-founder and managing partner at Kaszek Ventures who sits on the board of the real estate company. “It’s a very significant disruption.”
The company made a leap forward when it signed a deal with insurer BNP Paribas Cardif in 2015. Quinto Andar pays a wholesale rate to insure apartments and get a better deal than individuals like Velazquez.
That’s a huge deal in Sao Paulo and Rio, where monthly rent that’s the basis for insurance calculations has almost doubled since 2008. Prospective tenants must have either a property owner in the city to back them, pay monthly insurance in lieu of a guarantor or, like Velazquez, put up a pile of money.
©2018 Bloomberg L.P.